A.Nos.4636 and 4637 of 2010 in C.S.No.902 of 2009 S.RAJESWARAN,J A.No.4636 of 2010 has been filed by the applicant/plaintiff in C.S.No.902 of 2009 to raise the order in A.No.5332/2009 in C.S.No.902 of 2009 order dated 9.3.2010 in respect of the property in Item No.1 which is more described in Schedule. A.No.4637 of 2010 has been filed by the applicant/plaintiff in C.S.No.902 of 2009 to suspend the order in A.No.5332 of 2009 in C.S.No.902 of 2009 dated 9.3.2010 in respect of the property in Item No.1. 2.For the sake of convenience, the parties are referred to as per their rankings in the suit. 3. The plaintiff filed C.S.No.902 of 2009 for a Judgement and decree against the defendant directing the defendant to pay the plaintiff a sum of Rs.75,40,000/- with 24% interest and subsequent interest on the principal amount of Rs.44,00,000/- from the date of the plaint till the date of realisation of the amount. 4. Along with the suit, an application No.5332 of 2009 was filed by the plaintiff under Order 38 Rule 5 CPC seeking a direction, directing the defendant to furnish security to the suit claim amount, failing which , an order of attachment before Judgment of the property specified in the suit schedule. In the schedule, two properties were mentioned and the first item is a residential flat No. 1 and 2 in the Ground floor of the building known as Asian Flat situated at Parthasarathypuram Main Road, T.Nagar, Chennai-17. The second item of the property is a vacant house site situated on the southern side of the Redhills Road, Kolathur Village, Chennai-99. 5. Notice was ordered in A.No.5332 of 2009 and the same was returned as 'unserved'. So, substituted service through publication was ordered and the same was effected on 6.1 2010. Even then, there was no representation for the defendant. Therefore, this Court on 20.10.2009 directed the defendant to furnish security for the suit amount of Rs.75,40,000/- on or before 30.10.2009. But, the defendant did not furnish security and therefore, this Court on 9.3.2010 passed an order of attachment of the suit schedule property. 6. Thereafter, A.No.4012 of 2010 has been filed by one Vallepalli Seetharama Mohan Rao, a power agent of one Sashikant Vallepalli to implead the latter ie., Sashikant Vallepalli. It is stated by the power agent that his principal entered into a sale agreement on 25.11.2009 which was duly registered as Document No.2299/09 on the file of the Sub Registrar, T.Nagar. He paid the entire amount and therefore, a sale deed was executed on 19.7.2010. When the sale deed was presented for registration, on 21.7.2010, the Sub Registrar, T.Nagar returned the sale deed stating that the plaintiff has obtained an interim injunction restraining the defendant not to sell or create any type of encumbrance of Item No.1 of the schedule mentioned property. Thereafter, he came to know that the injunction order was passed by this Court on 9.3.2010, but, he entered into a contract with the defendant on 10.11.2009 itself. Therefore, he pleaded that he should be impleaded in A.No.5332 of 2009. 7. This Court on 28.7.2010, allowed A.No.4012 of 2010 and the impleading applicant in A.No.4012 of 2010 was impleaded in A.No.5332 of 2009. 8. The impleaded party thereafter filed A.No.4636 of 2010 and A.No.4637 of 2010 for the aforesaid reliefs. 9. Heard the learned counsel for the impleaded party and the learned counsel for the plaintiff. I have also gone through the entire documents available on record. 10. The main contention of the impleaded party is that he entered into a registered sale agreement with the defendant on 25.11.2009 and pursuant to that agreement, a sale deed was executed on 19.7.2010. Therefore, the sale deed executed on the basis of the sale agreement dated 25.11.2009 is very much valid. He pointed out that only on 9.3.2010, the order of attachment was passed. Therefore, this will not vitiated the sale agreement entered into between the parties on 25.11.2009 and therefore, insofar as the first item of the suit property is concerned, the same is to be raised from attachment. 11. Per contra, the argument advanced on behalf of the plaintiff is that both the defendant and the impleaded party are close associates and they colluded together to defeat the rights of the plaintiff. Therefore, it was contended that the attachment is very much valid and the same could not be raised at all. 12. I have considered the rival submissions carefully with regard to facts and circumstances of the case together with citations. 13. The learned counsel for the impleaded party relied on the following decisions to submit that as the attachment was later and much after the sale agreement entered into between the parties, the sale agreement cannot be ignored and the subsequent sale deed is not vitiated. 1)AIR 1935 MAD 872 (Veerappa Thevar-v-C.S.Venkatarama Aiyar) 2)AIR 1973 ALL 455 (Banta Singh-v Dy.Director of Consolidation) 3)AIR 1983 MAD 217 (M/s S.U.S.Davey Sons-v-P.M.Narayanaswami) 4)AIR 2004 AP 377 (Adinarayana-v-V.S.Gafoor Sab) Before proceeding to decide the issue, let me consider the citations referred to by the impleaded party to cull out the legal principles settled thereon. 1) In AIR 1935 MAD 872 (cited supra) a Division Bench of this Court held as follows: " These appeals raise a common point. The three appellants were respondent to a decree holder's execution petition for the sale of property attached prior to Judgment. It appears that a temporary injunction had been obtained to restrain the owner of the property, the later Judgment-debtor from alienating it. The matter was taken to the High Court on appeal, with the result that the order for an injunction was discharged and the property was attached. The High Court order was dated 21st December 1928, and the attachment was made on 26th December 1928. Prior to the attachment the owner of the property had entered into agreements with the appellants' all on the same day, 26th December 1928, for the sale of the property. In pursuance of these agreements the property was conveyed by sale deeds to the appellants subsequent to the date of the attachment. The lower Court has found in favour of the validity of the agreements of sale, and this finding is not disputed in appeal. It has also found that there were certain balances of purchase money payable under the contracts, amounting to Rs.32,500 , Rs.8,000 and Rs.5,412,80 respectively, which were unpaid at the date of the attachment. We see no reason for not accepting the correctness of the lower Court's finding on these heads. But the lower Court has ordered the sale of the property in execution for the recovery of these amounts with 9% interest which is payable under the contracts. We are of opinion that this order for the sale of the property cannot be justified.
The question is covered by Venkata Subba Rao,J’s Judgment in 68 MLJ 67(1) with the reasoning of which we concur. The facts there were that two days prior to attachment there had been an agreement to sell the property. Subsequently, a sale deed was executed and the payment of the purchase money was completed at the same time. The learned Judge rejected the argument founded on S.64,Civil P.C. , that the sale was void against the attaching creditor, holding upon the authority of 21 CWN 158(2) and 5 L.W.234(3), that the section could not invalidate a sale in pursuance of an agreement to sell made prior to the attachment. In short, an agreement to sell creates an obligation to convey the property, and a later attachment will not override the conveyance made in performance of that obligation. On the other hand the attachment holds good in respect of such right as the vendor had in the property at the time of attachment.
” What was and could be attached by the creditor”, said Venkatasubba Rao, J was the right, title and interest of his debtor at the date of the attachment and that right as to the unpaid balance of the purchase money, and the attachment therefore holds good to the extent of that balance.
The Judgment of Pearson,J in 57 Cal 274(4) at P.281, is to the same effect. In both of those cases the purchase money had been fully paid, and it was held that the decree holder was entitled to receive the portion paid subsequent to his attachment. When, as in the present case,there is an unpaid balance of the purchase money the attachment fastens to the Judgment debtor’s right to recover the money, that is to say, to the charge which the unpaid vendor is given byS.55(4)(b) T.P.Act, upon the property. But the property having passed by conveyance from the Judgment-Debtor cannot be sold in execution of the decree against the Judgment-Debtor. See 31 ALL 443(5). The appeals are accordingly allowed and the order for sale made by the lower Court is set aside. But we make no order as to costs because the decree-holder is entitled to satisfy his decree out of the unpaid purchase money owing by the appellants, and they should have paid this money into Court when the execution proceedings were taken against them and so discharged themselves of their liability. Appeals allowed.”
2. In AIR 1973 ALL 455 (cited supra) the Allahabad High Court held as follows:
“12. No doubt, the agreement to sell is not tantamount to a transfer of the property itself. The only effect of the agreement is that the contracting party can enforce the terms of the agreement and obtain a transfer. But unless the property is transferred by a deed of conveyance as required by law, he gets no rights in the property, but, all the same, he has the right to enforce the contract. Order 38 Rule 10 CPC is wide enough to include even such a right and therefore the transfer made in pursuance of an agreement entered into prior to the attachment of the property will not be defeated on the ground that the transfer was made after the attachment and Order 38, Rule 10 CPC will come to the rescue of the transferees. This view finds support from uniform decisions of various High Courts.
13. In Yeshvant Shanker Dunakhe-v-Pyaraji Nuriji Tamboli AIR 1943 Bom 145 , it was held that:-
” The Principle laid down in O.38 Rule 10 is not limited to attachments before Judgment. It applies to all attachments. Whether before Judgment or in course of execution. Where the purchase in pursuance of a decree for specific performance is subsequent to the attachment but the agreement in pursuance of which the decree has been passed was prior to the attachment the purchase prevails against the attachment.”
14. In Radha Kant Jha-v- Ramanup Singh AIR 1950 Pat.166, a Division Bench of the Patna High Court took the view that:
“An attachment before Judgment cannot prevail over a sale deed executed in respect of the attached property before the order of attachment is made even though the sale deed is registered after the attachment. If in such a case the person attaching the property purchases it subsequently in execution of his decree, he cannot get a valid title to the property as against the prior private purchaser.”
15. In Veerappa Thevar-v C.S.Venkatarama Aiyar AIR 1935 Mad.872
a Division Bench of the Madras High Court laid down the following proposition of law:
“An agreement to sell creates an obligation to convey the property and a later attachment will not override the conveyance made in performance of the obligation. The attachment holds good in respect of such a right as the vendor had in the property at the time of attachment.”
16. In Kochuponchi Varughese-v Oouseph Lonan AIR 1952 Trav Co 467 a Division Bench held:
” Though an agreement to sell immovable property does not create any interest or charge on the property it can prevail over a subsequent attachment. The attachment holds good only as against the then unpaid balance of the purchase money under the prior agreement to sell.”
17. The same view was expressed in Ghusaram-v- Parashram AIR 1936 Nag.163 and Babu Deokinandan Singh-v- Saiyed Jawad Hussain 106 Ind Cas 356= (AIR 1928 Pat 199). In the latter case, a Division Bench of the Patna High Court reiterated the same legal position.
18. Thus, fairly a large number of the High Courts have taken the view that the attachment before Judgment would not affect the sale in pursuance of an agreement to sale entered into prior to the date of attachment. The view in the circumstances taken by the Deputy Director of Consolidation is fully supported by Order 38 Rule 10 CPC and other decisions of the various High Courts.”
3. In AIR 1983 MAD 217 (cited supra) a Division Bench of this court held as follows:
“6. When an attachment is effected the person against whom the order is made is prohibited and restrained from transferring or charging the property. The order of attachment is issued against the Judgment debtor and in respect of all his interest in the immovable property. In this case, the actual order of attachment made is not produced. But it is presumed that it is in the same form as contained in form 24 of Appendix to the Civil P.C. That only is directed against the defendant or the Judgment debtor and the word’ defendant or Judgment debtor’ would not include a mortgagee with power of sale. We a re specifically referring to this because, we have already stated in the earlier part of the Judgment that no notice of attachment was specifically issued to the mortgagee nor does the order of attachment as such include a mortgagee with a power of sale, under Section 69 of the Transfer of Property Act. In the light of the provisions, therefore, we are of the view that the word ‘Private transfer’ occurring in Section 64,Civil P.C would on mean a transfer by the person again whom the attachment was made or prohibitory order was issued in respect of the immovable property or whose interest(including his legal representative)is attached but would not include a sale or transfer made by a mortgagee with a power of sale. In fact, Order 38, Rule 10, Civil P.C also states that attachment before Judgement shall not affect the rights of persons not parties to the suit nor bar any person holding a decree against the defendant from applying for the sale of the property under attachment in execution of such decree.
7. Mr.Dolia, learned counsel for the appellant, contended that in a sale under Section 69 of the Transfer of Property Act by a mortgagee, the purchaser acquires title to the property free from all encumbrances subject only to the provisions contained in Section 69(4) of the Transfer of Property Act, and that the attachment does not preclude the mortgagee from bringing the property to sale. The Supreme Court had occasion to consider the right of the mortgagee under Section 69 of the Transfer of Property Act in the decision reported in Narandas v. S.A.Kamtam, AIR 1977 SC 774. The Supreme Court pointed out (Para 36)-
“It is erroneous to suggest that the mortgagee is acting as the agent of the mortgagor in selling the property. The mortgagor, exercises his right under a different claim. The mortgagee’s right is different from the mortgagor’s. The mortgagee exercises his right under a totally superior claim which is not under the mortgagor, but against him.
In other words, the sale is against the mortgagor’s wishes. Rights and interests of the mortgagor and the mortgagee in regard to sale are conflicting. (The emphasis is ours).”
In fact, Section 69 is one of these rare instances where a person, who is not the owner of the property, could convey the right, title and interest of a third party mortgagor. The mortgagee gets a power to sell the mortgagor’s interest in the property along with his interest and while exercising such power of sale, as observed by the Supreme Court he is not acting under the mortgagor or as an agent of the mortgagor or as an agent of the mortgagor. The attachment order will have therefore no effect on the power of sale exercised by the mortgagee.
8. The Privy Council in the decision reported in Rajah Kishendutt Ram v. Rajah Mimtaz Ali Khan, (1880) ILR 5 Cal 198 at p.211, held with reference to a sale under Section 69 of the Transfer of Property Act thus-
“The effect of a sale under a power of sale is to destroy the equity of redemption in the land and to constitute the mortgagee exercising the power a trustee of the surplus proceeds, after satisfying his own charge, first for the subsequent incumbrances, and ultimately for the mortgagor. The estate, if purchased by a stranger passes into his hands free of all the incumbrances.” Thus, the purchaser though did not derive title under or through the mortgagee, acquires a larger estate free from all incumbrances. In the suit filed by the first respondent he could have dealt with only the mortgagor’s right and he could not have dealt with the mortgagee’s right who is neither a party to the suit nor was he in any way indebted to the plaintiff. We are, therefore, of the view that the sale held in exercise of the power under Sec. 69 of the Transfer of Property Act is not affected by the attachment made and the purchaser in such an auction held by the mortgagee gets absolute title free from all incumbrances. The execution, therefore, could not be proceeded against even to the extent of the interest of the judgment debtor in the property, which is mentioned above. Accordingly, this appeal is allowed the judgments and decrees of the court below and the learned single Judge are set aside and the execution application. E.A.5287 of 1973 is allowed. There will be no order as to costs.
4.In AIR 2004 AP 377 (cited supra) the Andhra Pradesh High Court has held as under:
14. The Supreme Court in Hamda Ammal v. Avadiappa Pathar, (1991) 1 SCC 715 clarified the point whether the agreement of sale entered into between the parties prevails over the attachment made subsequent to the agreement of sale.
15. In the above decision the Supreme Court while considering the scope of Order 38, Rules 5 and 10 and Section 64, CPC held that the sale-deed executed prior to attachment before judgment can be registered subsequently and it will prevail over the attachment. The Court further held that a transaction of sale having already taken place even prior to the institution of the suit cannot be said to have been made with the intention to obstruct or delay the execution of any decree. Order 38, Rule 10 also makes it clear that the attachment before judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit. The Court also held that when the property belonged to the judgment debtors and when the sale-deed had already been executed by them prior to the attachment before judgment and only registration remains, then neither the attachment before judgment nor a subsequent attachment or Court sale of the property would confer any title by preventing the relation back. The fact that the document of sale had not been registered only after the attachment makes no difference. Even an unregistered document can be received as evidence for purposes mentioned in the proviso to Section 49 of the Registration Act. The contention that till registration, the execution of the sale-deed does not confer any rights whatsoever on the vendee cannot be accepted.
16. In S.Noordeen v. V.S.Thiru Venkita Reddiar, (1996) 3 SCC 289 : (AIR 1996 SC 1293) the Supreme Court held as follows:
The attachment before the judgment is an encumbrance preventing the owner of the property to create encumbrance, sale or create charge thereon. Attachment before judgment does not create any right, title or interest, but it disables the judgment-debtor to create any encumbrances on the property.
17. In Narayanan Nair Ramakrishna Nair v. Zacharia Kuriakose, AIR 1991 Kerala 152 a single Bench of the Kerala High Court held that a judgment made after a contract for specific performance does not affect a prior agreement to sell and attachment could only fasten the debtor’s right to the unpaid purchase money.
18. In D.V.Narsimharao v. P.Ramayyamma, (1987) 1 Andh LT 718 a single Bench of this Court presided over by Justice K.Ramaswamy, as he then was, considered the scope of Section 64, Order 38, Rule 10, CPC and Sections 40 and 54 of the Transfer of Property Act and held that a contract for sale of property prevails over subsequent attachment of the same property before judgment. It was clarified by the Court that though the agreement for sale does not create any right, title or interest in the property under Section 54 of the Transfer of Property Act, it creates an interest in the property by operation of second paragraph of Section 40 of the Transfer of Property Act and this right prevails by operation of Order 38, Rule 10, CPC. Therefore, the rigour imposed under Section 64 of the Code does not prevail and the attachment before judgment does not prevail over the contract for sale. The learned Judge considered this aspect at length by quoting certain paragraph of Mulla’s Book on Transfer of Property Act, 1882, Fifth Edition and also the case law relating to this point.
22. In paragraph No.10 at page 199 of the Mulla’s Transfer of Property Act, 1882, Fifth Edition, it is mentioned thus:
“There is a conflict of decisions as to whether the obligation annexed by this section to the ownership of property by a contract of sale will prevail against claims enforceable under an attachment. If after a creditor C has attached A’s property, A sells it to B, the conveyance to B will be subject to the claims of C enforceable under the attachment. This is because under Section 64 of the Code of Civil Procedure any private transfer by A after the attachment will be void as against such claims. But, if the subsequent conveyance was in pursuance of an agreement of sale which was before the attachment will the claims of C enforceable under the attachment be subject to the obligation created by the contract of sale to B?”
23. In the said book, the learned author noticed conflicting views of the Calcutta and Madras High Court and commented as follows:
“The Madras High Court has taken the same view on the ground that if a creditor attaches property which is subject to a particular obligation, he should not be able to override it. In the case of an attachment before judgment this is so expressly provided by Order 38, Rule 0 of the Code. Again if after the attachment the vendee filed a suit for specific performance of the contract and the Court endorsed execution of a conveyance, it is clear that such conveyance would not be a private transfer subject to the provisions of Section 64 of the Civil Procedure Code.”
24. In Veeraraghavayya v. Kamala Devi, AIR 1935 Madras 193, the Madras High Court considered the effect of attachment of property and subsequent sale in pursuance of the contract and held thus
“Where a purchase is subsequent to the attachment, but the agreement in pursuance of which the purchase is made, is prior to attachment, the purchase prevails against the attachment.”
25. The Madras High Court took the same view in Rebala Venkata Reddi v. Yellappa Chetti, AIR 1917 Madras 4.
26. In Diravyam Pillai v. Veeranan Ambalam, (1939) 2 Mad LJ 822: (AIR 1939 Madras 702) Varadachariar, J. as he then was, at page 831 (of Mad LJ) : (at p. 706 of AIR) held as follows:
“The question is not whether any interest has passed under the contract to sell. The attaching decree-holder attaches not the physical property, but only the rights of the judgement-debtor in the property.”
27. This view was followed by Wardsworth, J. in Athinarayana v. Subramania, AIR 1942 Mad 67 wherein the learned Judge has held thus:
“Though a contract to sell does not having regard to the terms of Sec.54 of the Act; create any interest in or charge on the property, it does give rise to an obligation which limits the right of the judgment-debtor and the attachment of the right, title and interest of the judgment-debtor is subject to any such limitation by which the judgment debtor was bound. Therefore, where subsequent to a contract to sell certain property, is attached in execution of a decree, the attachment does not prevail over the pre-existing contract to sell even though the attachment creditor has no notice of the contract to sell. The right of the judgment-debtor in the property is on the date of the attachment qualified by the obligation incurred by him under the earlier contract to sell and the attaching creditor cannot claim to ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgment-debtor.”
28. K.Ramaswamy, J. while agreeing with the views of the Madras High Court and by expressing that the learned Judge is bound by the ratio laid down by the Madras High Court held that though the agreement of sale does not create any right, title or interest in the property under Section 64 of the Code of Civil Procedure, it creates an interest in the property by operation of second paragraph of Section 40 of the Transfer of Property Act, 1882 and this right prevails by operation of Order 38, Rule 10, C.P.C., therefore, the rigour imposed under Section 64 does not prevail. The agreement of sale is not thereby void and the attachment does not prevail over the contract for sale.
29. In the case on hand, the agreement of sale was executed on 15.6.1990 and the attachment before judgment was ordered on 5.3.1992. Though the sale-deed executed by the Court on 7.8.1993 was subsequent to the date of attachment, the agreement of sale, which was executed prior to the date of attachment, prevails over the attachment. In the light of the above legal position, I have no hesitation to hold that the agreement of sale prevails over the attachment before judgment; therefore, the schedule property cannot be brought to sale. The lower Court rightly concluded that the agreement of sale prevails over the attachment before judgment. There are no grounds to interfere with the order of the lower Court.
14.From the above, it is very clear that the agreement of sale which was executed prior to the date of attachment will prevail over the judgment.
15.In the light of the settled legal decisions, now let me consider the facts of the present case to find out whether there was a valid prior sale agreement which will prevail over the attachment made by this Court.
16. A copy of the sale agreement entered into between the defendant and the impleaded party was made available in the typeset of papers filed by the impleaded party. A perusal of the same would show that it was entered into on 25.11.2009 and the same was registered as Doc.No.2229/09 on the file of Sub-Registrar Office, T.Nagar.
17. A perusal of the Court records will show that the attachment order was passed with regard to the schedule properties containing item No.1 and 2 on 9.3.2010 which means much after the sale agreement executed between the parties i.e. on 25.11.2009. The first item in the schedule property and the subject matter property in the sale agreement is one and the same. The impleaded party also filed the receipt issued by the defendant admitting that the entire sale consideration amount from the impleaded party has been received. A copy of the sale deed executed between the parties on 19.7.2010 was also made available and also the note issued by the Sub-Registrar Office, T.Nagar stating that the same could not be registered due to the order passed by this Court in A.No.5332 of 2009 in C.S.No.902 of 2009.
18. Once it is made clear that the sale agreement is prior to the date of attachment passed by this Court, it goes without saying that the sale deed executed by the parties on 19.7.2010 is very much valid and therefore the impleaded party has made out a case for raising the attachment in so far as the first item of the property in A.No.5332 of 2009 is concerned.
19.In the result, I allow A.No.4636 of 2010 and accordingly, the attachment order in A.No.5332 of 2009 dated 9.3.2010 in respect of the property in item No.1 which is described in the schedule is raised. No costs.
20.In view of the order passed in A.No.4636 of 2010, A.No.4637 of 2010 is closed. No costs.
28.09.2010
sg/vs
Note: 1) Registry is directed to communicate
the order copy to the concerned
Sub-Registrar Office.
2) Issue order copy on 30.09.2010.
S.RAJESWARAN,J
sg/vs
A.Nos.4636 and 4637 of 2010
in
C.S.No.902 of 2009
28.09.2010